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What is Cryptocurrency? YouHodler Guide for Beginners

Want to learn about cryptocurrency but don't know where to start? You've found the perfect beginner's guide from the experts at YouHodler. We will explain the basics of crypto in plain, easy-to-understand language. We'll cover what it is, how it works, the types of coins, and the must-know terminology.

Further down, you'll find links to detailed guides on top cryptocurrencies. Click any that interest you, and you'll be taken to comprehensive references for each individual crypto coin.

Let's start at the very beginning by answering the question - what is cryptocurrency? Read on to understand the fundamentals of how it all works. Once you've got the basics under your belt, feel free to explore the top cryptocurrencies section to go deeper into any coins of interest.

Crypto Basics

There's a lot to unpack when it comes to crypto. Our aim at YouHodler is to give you a solid yet digestible overview without beating you over the head with too much complex information all at once. Consider it your beginner's crypto crash course!

What is Cryptocurrency?

In simple terms, cryptocurrency is digital money that people can use to buy goods and services. It uses cryptography (advanced coding) to secure transactions and create new units. The big distinction is that no government or central bank controls cryptocurrency.

The first cryptocurrency, Bitcoin, was created in 2008 by the mysterious and elusive Satoshi Nakamoto, laying the foundations for what was to come.

Ethereum emerged in 2015 as a more flexible platform for decentralized apps and smart contracts. Since then, the crypto space has grown exponentially, with thousands of coins and tokens coming into existence - some quite dubious or risky, while others innovative and credible.

Blockchain

Blockchain serves as the underlying technology powering most cryptocurrencies. It functions as a decentralized digital ledger that chronologically records transactions across a network of computers. This decentralized structure creates transparency, security, and immutability since no single entity can alter the public record of transactions.

Smart Contracts

Smart contracts are programs built into blockchains that automatically execute agreements between parties based on code rather than trust. For example, a smart contract can automatically send cryptocurrency to another party once the conditions written in the contract are met.

Decentralization

Decentralization indicates no central authority controls the currency. With traditional money, governments and central banks determine supply and monetary policy. Cryptocurrency operates independently of centralized third-party oversight, providing users enhanced financial sovereignty.

Wallets

Cryptocurrencies are stored in digital wallets, which can be web-based, mobile, hardware (USB), paper (printouts), or desktop software. Wallets contain public addresses to receive crypto and the private keys required to send it.

Exchanges

Exchanges are platforms where you can buy, sell, and trade cryptocurrencies. They offer accessibility for those looking to enter the crypto space by converting traditional currencies into digital assets. Exchanges also provide technical tools for more advanced traders. Due diligence is a must when signing up for an exchange as they vary in security practices and regulatory compliance.

Cryptocurrency Transactions

Transactions get recorded on the public blockchain ledger and can be viewed openly, though the actual identities of those involved are encrypted. Some cryptocurrencies prioritize anonymity more than others. There are also privacy-enhancing protocols to improve confidentiality. While transparent, connections to real-world identities can remain obscured to a certain degree.

Check Info about Crypto

By clicking on any of the icons below, you'll be taken to in-depth guides on the top cryptocurrencies. Savvy crypto investors don't just buy coins based on some influencer's advice or a Discord chat - they get a good grasp of the fundamentals, team, technology, and use cases.

We've put together these guides to give you a deep level of insight. You'll go beyond surface-level understanding to truly appreciate the uniqueness of different cryptocurrencies like Bitcoin, Ethereum, Solana, Matic, and others.

Click below on the cryptocurrencies you want to explore further to discover detailed background information for each one.

Types of Cryptocurrency

By breaking cryptocurrencies into categories based on their purpose, the different coins become less overwhelming and easier to digest. You can focus on the coins that you find most valuable as an investor or user.

Knowing the category context also gives you a good understanding of how new projects fit into the broader crypto ecosystem. By grasping the difference between what different tokens do, you'll gain perspective on the sheer diversity of innovations that blockchain technology has to offer.

Layer 1 Cryptocurrencies

Layer 1s create the foundation which other crypto projects build upon. They make up the base layer for other apps and coins in the ecosystem to operate on.

Examples: Bitcoin (BTC), Ethereum (ETH), Solana (SOL)

Layer 2 Cryptocurrencies

These are built on top of the Layer 1 blockchains mentioned above to upgrade scalability and efficiency, and they'll often solve problems like high fees or slow transactions.

Examples: Bitcoin (BTC), Ethereum (ETH), Solana (SOL)

DeFi Cryptocurrencies

Using DeFi (decentralized finance), crypto lending, borrowing, trading, and transacting peer-to-peer is made possible using blockchain-based smart contracts.

Examples: Uniswap (UNI), Aave (AVE)

Gaming Cryptocurrencies

Gaming cryptocurrencies are used in blockchain-based games and metaverse virtual worlds. They power features like in-game transactions, rewards systems, governance voting, and NFT and token integration.

Examples: Axie Infinity (AXS), The Sandbox (SAND)

Meme Coins

Meme cryptocurrencies started as coins created for fun or as a joke, often based on an internet meme or viral trend. However, some have grown into valuable projects with engaged communities.

Examples: Dogecoin (DOGE), Shiba Inu (SHIB)

Stablecoins

As their name suggests, stablecoins were created to maintain a stable value. For example, the two biggest stablecoins are pegged 1:1 with the US dollar.

Examples: Tether (USDT), USD Coin (USDC)

Yield Farming Tokens

An offshoot of DEFI that gives users the opportunity to earn rewards through lending or staking their assets.

Examples: Yearn.finance (YFI), PancakeSwap (CAKE)

Cross-Chain Tokens

Cross-chain tokens are cryptocurrencies that allow interoperability between different blockchains. By removing silos, tokens, and data can flow with ease between the other chains.

Examples: Polkadot (DOT), Cosmos (ATOM)

Exchange Tokens

Exchange tokens are the native cryptocurrencies of crypto exchanges used for various exchange-specific activities.

Examples: Binance Coin (BNB),Huobi Token (HT)

Governance Tokens

Grant holders voting rights in decentralized protocols, influencing the development and changes in the network.

Examples: Maker (MKR), Compound (COMP)

Privacy Tokens

Unlike transparent blockchains like Bitcoin, privacy coins limit visibility. There are two sides to the coin for privacy tokens - they remain controversial due to perceived potential for illicit usage but also uphold ideals of financial autonomy and censorship resistance.

Examples: Monero (XMR), Dash (Dash)

Putting Knowledge Into Practice With YouHodler

Now that you have some understanding of cryptocurrency basics and the diverse range of cryptocurrencies, it's time to put that knowledge into practice. This is where YouHodler comes in.

As an industry-leading crypto fintech platform, we combine a range of quality crypto services, including secure wallets, crypto loans, crypto cards, and more. To get the most out of your cryptocurrency, YouHodler gives you the tools to fully control your crypto. Explore our easy-to-use platform, backed by competitive rates and 24/7 customer support, to manage your cryptocurrency with confidence.